Changes with regard to the entitlement to family tax allowance

10 August 2015

Family tax allowance reduces the amount of the consolidated tax base. This tax allowance may be claimed after dependent beneficiaries according to the number of the dependent children for the month that qualifies as a month of eligibility for the recipient.

Month of eligibility shall mean the month in respect of which eligibility for family allowance exists. It is not a condition family allowance to be paid to the recipient but the entitlement shall exist.

In 2015 the amount of family tax allowance - depending on the number of dependants - shall be 62 500 forints if the number of dependants is one or two, 206 250 forints if the number of dependants is three or more, for each dependant beneficiary per each month of eligibility.

The individual shall prepare a tax advance declaration to claim the family tax allowance for the tax year, which shall include the tax identification number – in the lack of tax identification number any natural identification data -  of the dependent children and dependent beneficiaries. The individual shall be entitled to family tax allowance after foetuses from the month of the 91st day after conception regardless of the fact that the eligibility for family allowance still does not exist and that the foetus still does not have a tax identification number or any other natural identification data.

The employer (payer) shall take the declaration into account at the payments following to the acceptance of the declaration within the tax year, which means that the declarant shall prepare new declarations in each tax year at least. In the event of any changes in the contents of the declaration, the private individual affected shall forthwith issue a new declaration.

If the private individual requested family tax allowance without eligibility, resulting in a difference in payments above 10 000 forints in the private individual’s tax return filed for the tax year in question, 12 per cent of the difference in payments shall be paid as an over/under-payment penalty in addition to the difference, furthermore the individual shall fulfil its tax return liability by self-assessment.

For example: there is a family with a child aged nineteen, who graduated from high school in June. The Hungarian State Treasury shall inform the recipient by a decision that the child shall not constitute an entitlement to the family allowance going forward; however the employer of the individual fails to receive this information. If the parent who claims the family tax allowance does not prepare a new declaration to the employer (payer) of the fact that he/she does not intend to claim the family tax allowance for the rest of the year, the employer (payer) shall take the family tax allowance, based on the previous declaration, into account. If the recipient does not modify the declaration until the end of the tax year, less tax advance will be deducted by as much as 60 000 forints on an annual basis and 7 200 forints shall be paid in addition as an over/under-payment penalty until the 20th of May 2016.

If the recipient prepares a new declaration with delay but prior to the payment of August at the latest, the individual shall reimburse the family tax allowance only for July until the 20th of May 2016 and there will arise no over/under-payment penalty.

Based on Act on Personal income Tax, the payer liable to withhold the tax advance shall inform the private individual concerned before the time of payment concerning the option for making a tax advance statement, and on the consequences that may ensue when a statement is provided, and when one is not provided, however the preparation of the declaration is the obligation of the private individual.

Based on a provision, approved in September 2014, from the 1st of January 2016 private individuals shall note the tax identification numbers of the dependent children and dependent beneficiaries (except for the foetuses) in the tax advance declaration and tax return for year 2015 for claiming family tax allowance, however it is expected that this provision will be requested to be modified in the autumn.

If it will yet to be a condition dependent children and dependent beneficiaries to have tax identification number for the claim of family tax allowance, individuals shall submit form ’15T34’ to the Hungarian Tax Authority for claiming the tax identification number.